FOIA Update: Significant New Decisions

January 1, 1997

FOIA Update Vol. XVIII, No. 4 1997

Significant New Decisions

Wiesenfelder v. Riley, 959 F. Supp. 532 (D.D.C. 1997).

Squarely affirming the continuing vitality of Exemption 2 to protect predominantly internal information the release of which would significantly harm agency operations, United States District Court Judge Stanley S. Harris has approved the nondisclosure of "trigger figures, error rates, and potential fines" used by the Department of Education to "ensure fiscal and administrative responsibility on the part of" educational institutions whose students receive Title IV loans and grants. As described by Judge Harris, trigger figures "alert" the agency that an "educational institution may be seriously mismanaging" its federal funds, while error rates "identify" the agency's "tolerances for mistakes." Noting the deference that courts apply to agency law enforcement efforts, Judge Harris rejected the claim that these items, as well as the dollar amounts of potential fines, are "secret law." He found instead that the information is used by the Department for "enforcement purposes only," not to regulate the public. He then concluded that release of the trigger figures, error rates, and potential fines would undeniably harm the Department of Education's regulatory efforts. Quoting the agency's affidavit with approval, Judge Harris opined that "[g]iving institutions the wherewithal to engage in a cost/benefit analysis in order to choose their level of compliance would substantially undermine the Department's regulatory efforts and thwart its program oversight."

Finding that the "administrative record in this case differs substantially" from the one compiled in a previous case, United States District Court Judge Royce C. Lamberth upheld NASA's decision to release certain contract information and, in so ruling, flatly rejected the submitter's contention that its voluntary decision to pursue a contract with NASA triggered the broad protections afforded voluntarily submitted information under Critical Mass. McDonnell Douglas brought this "reverse" FOIA action in an attempt to stop NASA from disclosing the Delta rocket "prices, incentive amounts, and billing arrangements" submitted in connection with its successful proposal to provide "Medium Light Expendable Launch Services." Judge Lamberth declared that "'the issue is not whether [McDonnell Douglas] was required to contract with NASA -- no one disputes that the process of offer and acceptance giving rise to contractual obligations is voluntary.' . . . Rather," he reasoned, "the relevant inquiry is whether the specific [items provided] were required to be submitted before NASA would award the contract." On this issue, he found that NASA acted reasonably in determining that its Request for Proposals "required" the submission of the information. He then sustained "NASA's determination that release will not cause substantial competitive harm" under National Parks, noting that NASA had specifically addressed each of McDonnell Douglas's claims with "extensive replies by experienced NASA personnel" who were "intimately familiar with [the submitter's] arguments and evidence."

Tax Analysts v. IRS, 117 F.3d 607 (D.C. Cir. 1997).

In a troubling decision that may be limited to its unique facts, the Court of Appeals for the District of Columbia Circuit held that Field Service Advice Memoranda (FSAs) prepared by attorneys of the IRS's Office of Chief Counsel constitute "secret law" and thus are not protected by either Exemption 5's deliberative process privilege or by its attorney-client privilege. FSAs are prepared in response to requests made by IRS field personnel seeking "legal guidance, usually with reference to the situation of a specific taxpayer." Each FSA "includes a statement of issues, a conclusions section, a statement of facts, and a legal analysis section," and is written "so that the strengths and weaknesses of a case are presented and developed candidly, directing attention to the authorities against the conclusions arrived at as well as those that support them." Their primary purpose is to "ensur[e] that field personnel apply the law correctly and uniformly," and while they are "not formally binding on IRS field personnel," they "are held in high regard and are generally followed."

With respect to the deliberative process privilege, the court of appeals emphasized that because the IRS is "attempting to develop a body of coherent, consistent interpretations of the federal tax laws," the fact that "FSAs are nominally non-binding is no reason for treating them as something other than considered statements of the agency's legal position." It then rejected the IRS's argument that the FSAs are predecisional, holding that "[a]lthough FSAs may precede the field office's decision in a particular taxpayer's case, they do not precede the decision regarding the agency's legal position." Rebuffing the IRS's argument that disclosing FSAs could mislead the public, the court concluded that "[e]ven if an FSA reflects a view eventually rejected by a field official, it still represents the opinion of the national office of the Office of the Chief Counsel, and the public can only be enlightened by knowing what the national office believes the law to be."

With respect to the attorney-client privilege, the D.C. Circuit followed its own narrow line of attorney-client cases, ruling that those FSAs that are "based upon information obtained from taxpayers" are not protected because they do not "rest on confidential information obtained from the client." The only exception it found was for those FSAs that "reveal confidential information transmitted by field personnel regarding 'the scope, direction, or emphasis of audit activity.'"